According to a recent SingleKey survey asking landlords what their biggest concerns are in selecting tenants, nearly half of the respondents indicated that insufficient funds or inconsistent employment history are the biggest red flags.
From unstable employment history to negative references, we’ll examine the most critical warning signs landlords encounter during the tenant screening process and how they can protect their property.
Insufficient income or inconsistent employment history
While landlords typically scrutinize a prospective tenant’s creditworthiness and previous landlord references, insufficient income and unstable employment history are the most significant warning signs for property managers.
Over 45% of landlords from our survey view insufficient income or inconsistent employment history as a red flag that decisively affects whether they approve a rental applicant.
To a small property manager with ten units or less, insufficient funds pose a problem because rental income is a top priority. While landlords examine income sources, they look at the tenant’s rent-to-income ratio. At the minimum, you want the prospective tenant to earn three times the amount of the rent. And if an applicant has an inconsistent employment history, that’s cause for concern.
Most property managers verify employment history to ensure the prospective tenant is not falsifying information. If a tenant can’t afford the rent and misses a payment, this can cause financial hardships for small landlords and property owners.
Negative references from previous landlords
The second biggest deterrent for approving prospective tenants is negative references. According to our survey, nearly 23% of landlords view negative references as red flags.
Previous landlords will provide information on the person’s behaviour, the rental property condition after they departed the rental, and if they paid rent on time or broke the lease early. These details will help landlords conclude whether they see the applicant as a suitable renter for their property.
If the previous landlord responds with concerning feedback about your prospective tenant, this can be considered a red flag.
Start setting expectations and learn to verify a tenant’s rental history. Having a list of prepared questions to ask previous landlords about prospective tenants will keep you organized and glean all the information you need to make an informed decision. To give landlords a general idea of questions to ask previous landlords, here is a checklist:
- Can you confirm the details of this tenant?
- Did this tenant pay rent on time?
- Did the tenant cause damage to the rental property?
- Is there anything else I should know?
All landlords and property managers should familiarize themselves with the Fair Housing Laws before screening a potential renter. Landlords should have a consent form included with the rental application.
Once you’ve spoken with a previous landlord, conduct a follow-up interview with the prospective tenants to hear their responses to the previous landlord’s feedback.
If a landlord discovers the prospective renter has no prior rental history, here is a list of things to look at during the screening process:
- Credit reports and credit scores
- Mortgage payments, if applicable
- Background check and criminal history
- Employment references (with consent)
- Proof of income
An applicant may have no previous rental or eviction history, but in the unlikely event that they were homeowners first, you can see if they made any late payments on their mortgage or property taxes. While a credit score can be misleading, running a credit check and reviewing the prospective renter’s credit history will give you a better idea of how financially reliable an applicant was in the past.
A background check is essential in ensuring that the tenant has no prior disruptive behaviour, like property damage or disturbing the peace. You want to protect your rental property and ensure your other tenants are happy if you have multiple units nearby..
Learn more about the details you can find in a background check.
Objection to running a credit check
It may be suspect if a tenant refuses to consent to a credit check. Just over 17% of landlords surveyed see an objection to running a credit check as a significant red flag. There could be some resolvable contributing factors as to why an applicant prefers to withhold this information. Suppose you have a limited selection of applicants, and you favour a tenant refusing to consent to a credit check. In that case, you can ask them about their concerns and tactfully inform your applicant that you require criminal background checks and a credit check for approval before you can draft a rental agreement.
As a landlord, navigating tenant screening questions can be tricky because you want to avoid overstepping your legal boundaries with statements that could be held against you.
Here are potential reasons why a prospective tenant would choose not to consent to a credit check in the screening report:
- They have a low credit score and are concerned you will judge them solely on their score.
- They are worried that you will not judge the credit history fairly.
- They have a poor credit history and a lot of debt.
Learn how to examine a credit report to form an educated decision.
Emphasis on personal hardships
Less than 12% of landlords viewed personal hardships as a red flag. As long as an applicant has a good credit history, steady employment, verified income source, and no criminal record of disruptive behaviour or property damage, personal hardships should rank low during the tenant screening process.
Here are some examples of what is considered a personal hardship:
- Illness or a severe injury of a tenant or dependent of a tenant
- Psychological distress
- Loss of higher-earning tenant income due to separation, divorce, or death of a loved one
- Other financial hardships, including loss of primary income
To ease your concerns about renting to tenants who could be potentially risky, use an online tenant screening report to reveal how reliable a prospective tenant might be. Make sure you speak with previous landlords to learn if they had healthy relationships with your prospective tenants and if they paid rent on time.
Owning an unreasonable number of pets
Allowing multiple pets to reside inside your rental property could have zero adverse effects. When all things are considered, such as the breed, age, and agreed-upon pet security deposit, there should be no issues with a tenant having multiple pets. Less than 4% of landlords were concerned with tenants having a lot of pets living in their rental property.
While most landlords accept multiple pets with specific provisions, some might believe that pets can be a source of stress for various reasons. Depending on regional laws, a landlord can refuse to allow a pet to reside on the property.
Property managers should include a “no pets allowed without the owner’s consent” provision in the addendum or lease.
FAQ: Understanding what makes a good tenant
There are certain qualities that make an individual more likely to be a reliable tenant. These include a history of paying rent on time, a good rent-to-income ratio (30% or higher), no history of disruptive behaviour, and a good credit history.
Tenant screening questions allow landlords to get acquainted with the prospective tenant and conclude if they are a good fit as a renter. Here are 9 questions landlords need to ask potential tenants.
When contacting a previous landlord for a potential tenant’s reference, here are some key questions to ask:
- Why did the tenants leave your rental property?
- How long did the tenant live at your rental property?
- What was the tenant’s rental amount and payment history?
- What was your overall experience renting to the tenant?
- Did the tenant give proper notice before leaving the property?
- Have you received any complaints about the tenant from the neighbours?
- How well did the tenant communicate rental needs (e.g., maintenance, rent delays, etc.)?
Our final thoughts
Screening a tenant doesn’t have to be intimidating. Get a comprehensive Tenant Report from SingleKey that removes any guesswork on whether a tenant will be reliable and pay rent on time. You can easily narrow your selection of applicants to an ideal pool with valuable information accessible in five minutes.